While profitability is essential, it doesn’t guarantee long-term success. Some companies that rest on their margins will lose ground as competition intensifies - as Jeff Bezos said, "Your margin is my opportunity".
A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. Keeping that in mind, here is one profitable company that leverages its financial strength to beat the competition and two that may face some trouble.
Two Stocks to Sell:
Warner Music Group (WMG)
Trailing 12-Month GAAP Operating Margin: 11.6%
Launching the careers of legendary artists like Frank Sinatra, Warner Music Group (NASDAQ: WMG) is a music company managing a diverse portfolio of artists, recordings, and music publishing services worldwide.
Why Does WMG Give Us Pause?
- Lackluster 4.4% annual revenue growth over the last two years indicates the company is losing ground to competitors
- Estimated sales growth of 3.7% for the next 12 months is soft and implies weaker demand
- Underwhelming 10.6% return on capital reflects management’s difficulties in finding profitable growth opportunities
Warner Music Group’s stock price of $29.99 implies a valuation ratio of 10.4x forward EV-to-EBITDA. To fully understand why you should be careful with WMG, check out our full research report (it’s free).
Belden (BDC)
Trailing 12-Month GAAP Operating Margin: 11.2%
With its enamel-coated copper wire used in WWI for the Allied forces, Belden (NYSE: BDC) designs, manufactures, and sells electronic components to various industries.
Why Is BDC Not Exciting?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 1.7% annually over the last two years
- Estimated sales growth of 4.3% for the next 12 months is soft and implies weaker demand
- Flat earnings per share over the last two years lagged its peers
At $122.01 per share, Belden trades at 16.8x forward P/E. Check out our free in-depth research report to learn more about why BDC doesn’t pass our bar.
One Stock to Watch:
Toast (TOST)
Trailing 12-Month GAAP Operating Margin: 2.2%
Founded by three MIT engineers at a local Cambridge bar, Toast (NYSE: TOST) provides integrated point-of-sale (POS) hardware, software, and payments solutions for restaurants.
Why Are We Fans of TOST?
- Customers view its software as mission-critical to their operations as its ARR has averaged 30.4% growth over the last year
- Estimated revenue growth of 20.7% for the next 12 months implies its momentum over the last three years will continue
- Operating margin expanded by 8.3 percentage points over the last year as it scaled and became more efficient
Toast is trading at $44.60 per share, or 4.3x forward price-to-sales. Is now the right time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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